How CrafterBy Calculates Costs

The Cost Calculation Chain

CrafterBy calculates product cost by summing all inputs associated with that product, then adding an overhead allocation. The full chain is:

Material cost = sum of (quantity used x cost per unit), adjusted for the waste factor set on each material.
Labour cost = sum of (time in hours x hourly rate) for each labour entry on the product.
Machine cost = sum of (hours used x cost per hour) for each machine assigned to the product.
Component cost = sum of (component cost x quantity used) for each component on the product.
Direct cost = materials + labour + machines + components.
Overhead allocation = calculated based on your overhead settings and the allocation method selected (per-product or by labour hours).
Total cost = direct cost + overhead allocation.

This total cost is the figure CrafterBy uses when you set a selling price, calculate a margin, or report COGS.

Worked Example: Sterling Silver Earrings

A jeweller is costing a pair of handmade sterling silver earrings with a gemstone setting. Here is how CrafterBy builds the cost:

Step 1 - Materials

Material	Quantity	Unit Cost	Waste Factor	Total
Sterling silver wire	12 cm	0.42 per cm	5%	5.29

The waste factor of 5% adds 0.6 cm of wire to account for offcuts and test pieces. Actual cost = 12 cm x 1.05 x 0.42/cm = 5.29.

Step 2 - Components

Component	Quantity	Unit Cost	Total
Gemstone setting (pre-made)	1	3.20	3.20

Step 3 - Labour

Task	Time	Hourly Rate	Total
Wire shaping and setting	45 min (0.75h)	20.00/h	15.00

Step 4 - Machine

Machine	Time	Cost per Hour	Total
Bench polisher	15 min (0.25h)	0.80/h	0.20

Step 5 - Direct Cost Summary

Materials	5.29
Components	3.20
Labour	15.00
Machine	0.20
Direct Cost Total	23.69

Step 6 - Overhead Allocation

This jeweller has set up monthly overhead of 400.00 and produces approximately 80 pieces per month, giving a per-product overhead allocation of 400 / 80 = 5.00 per product.

Step 7 - Total Cost

Direct Cost	23.69
Overhead Allocation	5.00
Total Cost	28.69

If this artisan sells the earrings for 55.00, their gross margin is (55.00 - 28.69) / 55.00 = 47.8%.

Why Each Element Matters

Waste factors ensure you are not underestimating material costs due to offcuts, spoilage, or test runs.
Labour is often the most underestimated cost for artisans. If your hourly rate does not reflect what you want to earn, your costs and therefore your prices will be wrong.
Machine costs account for the real cost of ownership and operation of equipment, including depreciation, not just electricity.
Overhead ensures your fixed business costs are recovered in every sale. See the Understanding Overhead article for more on this.